|October 7, 2009|
Previously published on October 5, 2009
Earlier today, October 5, 2009, the Tax Section of the New York State Bar Association (NYSBA) filed with the US Department of the Treasury, the Internal Revenue Service, and Congress a comprehensive Report on Section 457A, which highlights a number of issues, interpretive matters, pitfalls, and other matters relating to the statute. The Report may become a primary point of reference for many tax advisors dealing with Section 457A.
Section 457A was enacted last year as a part of the Emergency Economic Stabilization Act of 2008 (commonly referred to as the “recovery” or “bailout” legislation, enacted on October 3, 2008). Section 457A follows Section 409A, enacted several years ago, which became the first comprehensive codification of the rules governing the federal income taxation of nonqualified deferred compensation.
Although initially aimed at reining in substantial deferrals of compensation paid to managers of hedge funds (and other funds), Section 457A as ultimately enacted has grown in scope, potentially covering certain non-U.S. operating companies and domestic investment funds, among others. (See Ropes & Gray's previously issued alerts regarding Section 457A, including IRS Releases Further Guidance Affecting Offshore Hedge Fund And Other Pooled Investment Vehicle Deferrals, Bailout Bill Contains Many Tax-Related Provisions, and Congress Blocks Offshore Hedge Fund Deferrals.)